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. Last Updated: 07/27/2016

Press Giant to Introduce Cover Prices

Press holding giant Prof-Media, publisher of leading newspapers Komsomolskaya Pravda and Izvestia, has announced it will start putting cover prices on its publications in a bid to get a tighter grip over sales.

Prof-Media will start printing the recommended price on the newspapers, the weekly tabloids Express-Gazeta and Antenna and the weekly business magazine Express starting July 1, officials told a group of angry distributors Thursday.

Then in the fall, the publishing house will stop offering bundles of publications to distributors at wholesale prices, selling them instead on consignment with fixed cover prices.

Distributors will have to negotiate discounts with Prof-Media - as their counterparts do today in the West.

Until now, Russian distributors have been free to slap on publications whatever profit margin they find feasible.

Calling the reforms revolutionary to the market, Prof-Media said they will be first tested in Moscow and in the neighboring regions before being expanded across Russia. "Even the soft form of a 'recommended price' is kind of revolutionary for the media market," said Vladimir Sungorkin, president of Prof-Media subsidiary Segodnya Press, presenting the plan to distributors.

"Behind the reforms is a desire to civilize the press market," he said. "We are well aware that distributors will not be wildly happy about it."

In fact, the initial reaction of distributors could be called wildly negative.

Mikhail Opolinsky, a director at the Metropolitenovets trading company, which operates more than 100 newsstands in Moscow metro stations, yelled: "What is this for? It's not very nice of publishers to count the money in a distributor's pocket!"

Prof-Media said it hopes the changes will increase its control over the newspaper and magazine market, enabling it to trace publications directly to the reader. The company also wants to prevent sellers from drastically marking up profit margins and from stealing parts of the circulation by declaring them as back orders but reselling them.

However, distributors retorted that reforms could not possibly come at a worse time. "Everybody wants to survive, but we suspect that you want to do it at our expense," said Vladimir Pavlov, representing one of the biggest distribution companies, Public Press.

Others said they were afraid that after the new system is introduced publishers will start reducing the discounts. Prof-Media promised that discounts will begin at 50 percent, thus allowing distributors to maintain their current profit levels.

Putting further pressure on distributors, Prof-Media told them that they would lose rights to sell all five publications if they did not heed to the new rules on every sale.

Mikhail Kozhokin, head of Prof-Media and the chief editor of Izvestia, said the company is prepared to bear some initial losses with the new system, which, he hopes, will quickly become profitable.

Prof-Media follows Sport Express, publishers of Russia's most reputed sports publications, in slapping prices on newspapers and magazines.

Since March, Sport Express has had a cover price of 6 rubles a copy and distributors have been obliged by a sales contract to sell at this price, Sport Express deputy director Nina Vetlugina said Thursday.

Distributors at Wednesday's meeting called Sport Express' experiment a failure, saying sales were dropping.

Vetlugina denied the allegation.

Other newspaper and magazine publishers are less certain about taking the price plunge. Natalia Prokofieva, chief accountant of Moskovsky Komsomolets, the nation's most popular newspaper, said that while she would favor such a move, her newspaper considers it too risky. "We would have to first draw up plans and perhaps create a commission of publishers and distributors to work it out," she said.

Yevgeny Abov, vice president of the Publishers' Association, said Thursday he was encouraged by Prof-Media's move. He said it was natural and reflected a civilized approach to the press market. "Gradually, publishers should be getting control of the market," Abov said. "So far, only distributors were calling the shots."